SA business confidence drops to lowest this year

South African business confidence declined to the lowest level this year
as industries raised concern about policy uncertainty, including the
ruling party’s plan to change the constitution to make it easier to
expropriate land without paying for it.

The gauge dropped to 38 in the third quarter, FirstRand’s Rand
Merchant Bank unit and the University of Stellenbosch’s Bureau for
Economic Research said in an emailed statement on Tuesday. All sectors
surveyed were under the neutral level of 50, “an infrequent and worrying
development,” RMB and the BER said. This was mainly because of
disillusionment about the country’s broad policy direction, it said.

Confidence indexes and agricultural land prices are slumping in part
due to the potential constitutional amendment that the African National
Congress in December decided is needed to correct racially skewed
land-ownership patterns. With elections looming next year, President
Cyril Ramaphosa has embraced land expropriation without compensation,
but insists there won’t be a land grab and any policy changes won’t be
allowed to damage farming production or the economy.

Gross domestic product contracted in the second quarter from the
previous three months, landing the economy in its first recession since
2009. The relationship between the index and GDP movements is
“historically tight”, so the renewed downward trend in confidence is
disconcerting, RMB and the BER said.

“We remain deeply concerned about the prospects,” said
Ettienne le Roux, RMB’s chief economist. “The political and policy
factors weighing down on business confidence must be resolved to produce
impetus for an increase in sentiment,” he said, referring to the ANC’s
land-reform plans.

The survey covered 1 700 business people in manufacturing, wholesale, retail, new-vehicle trade and construction.